Monday, April 3, 2017
GSE Abuse and Presidential Agony
First they came for the Socialists, and I did not speak out—
because I was not a Socialist.
Then they came for the Trade Unionists, and I did not speak out—
because I was not a Trade Unionist.
Then they came for the Jews, and I did not speak out—
because I was not a Jew.
Then they came for me—and there was no one left to speak for me.
Martin Niemöller (1892–1984) was a prominent Protestant pastor who emerged as an outspoken public foe of Adolf Hitler and spent the last seven years of Nazi rule in concentration camps.
Fannie/Freddie and the Ongoing Crap,
Why I Think the Future Looks Worse?
(Psst. Because of the %$#^ Congress)
Ho hum, we had another federal judge rule against the GSEs and their investors last week, when an Iowa judge in the Northern District did his “Lamberth thing” and claimed—in the Saxton complaint--the federal government couldn’t be sued and federal regulators could do anything to Fannie and Freddie they want without judicial review, based on the 2008 Housing and Economic Recovery Act (HERA), which allowed the Bush Treasury Department and Secretary Hank Paulson to put the two GSEs into “conservatorship.”
One more lost opportunity for a federal judge to take a firm stance on behalf of US mortgagors and plaintiffs who think the Treasury and the Federal Housing Finance Agency (FHFA) violated the law and, possibly, the Constitution, with their GSE regulatory mismanagement, since the 2008 takeover almost nine years ago and Treasury’s 2012 “sweep” decision.
As I ruefully and painfully suggested to friends, when all of these federal judges cop the same attitude and reach the same decision, maybe it's we, not the feedral government, who are wrong" We certainly—with some of the nation’s best lawyers working their creative buns off (at rates I am sure exceed $1000 per hour for some)—haven’t been able to convince any federal judge, anywhere of the virtues/justice of the GSE’s legal case.
Have the judges all been captured by the “financial establishment?”
Yes, I read the Rule of Law Guy’s (ROLG) latest piece and I respect his legal skills and writing, but it doesn’t change while the “good guys” wish and hope for miracles, the other side is racking up judicial wins and we don’t have one.)
Admittedly we still have Sweeney, Collins, Pagliara, and Delaware. But, it’s a dwindling list and the geographic distribution of federal judicial “Lamberth lovers” makes it tough to prevail.
The bad guys have the mighty “Lamberth decision,” the equivalent to most hearing federal judges of heroin to a junkie. (I guess I could have said “a Hershey’s to a chocoholic,” but like this analogy better.)
As the past week evolved, GSE fans tried to read the most positive interpretation-- with no clear answer, yet--into the Treasury and DoJ claiming in court the FHFA and the CFPB were not constitutionally viable. I suspect that they will use the same principle to attack both agencies because they know nobody who matters is watching.
So, no GSE victories on that front, either, yet.
Friday approached and the last and slimmest F&F hope was that Treasury Secretary “Nooch” would do a Lone Ranger, riding in as the sun was setting, and tell the Mel Watt the GSEs should keep for capital purposes their fourth quarter 2016 $10 Billion simollian dividend due at Treasury that day.
Well we now know that opportunity is gone, too, and the Trump Admin—at least Treasury Secretary Steve Mnuchin—ain’t going to let the GSEs keep those payments for capital, but instead, inflate the Treasury’s General Fund by that amount
Bye-bye GSE capital and hello to more Fannie and Freddie earnings going for other government spending; hello more congressional interference and uncertainty.
Disappointed and Dismayed
Plenty of GSE supporters and investors believed in Mnuchin’s early commentary on how he wanted to free the GSEs from the federal government’s handcuffs and return them to private ownership and some sense of entrepreneurial operation. We rationalized all sorts of reason why he was “right on.”
We supported him and extolled the boost to the nation’s housing sector with its 20% of domestic product. We declared the political logic of Donald Trump striking a blow for low, moderate, and middle income families—not to mention minorities—who, as Candidate Trump, he pledged to help and improve their lives.
Some of us reveled in the hope and chance that “Nooch” wouldn’t let the nation’s largest banks get their grips on the secondary mortgage market, as they have the primary mortgage market, thanks to his resurrected Fannie and Freddie, playing the positive role as mortgage market chokehold to keep big bank originated bad loans out of the market and away from those who cannot manage them.
The Really Bad GSE News
Can any of that good stuff still happen?
Sure, but not anytime soon, if ever. That’s because the always destructive GSE contingent in Congress has been attentive and hasn’t been sitting on their butts, as all of the “GSE happy talk” came from the greatly outnumbered and outgunned pro-Fannie and Freddie advocates mumbling hopefully about Steve Mnuchin and all of Donald Trump’s major GSE investor friends.
If the Trump healthcare debacle wasn’t enough to convince you on the inability of this GOP Congress to legislate, thoughtfully, watch what it will do when GSEs become their objective.
Again, as predicted here weeks ago, the anti-GSE crowd hasn’t been idle.
GSE opponents have been meeting and working, none of which should be good news for this WH and Treasury because as we’ve see this Congress can and will screw up the proverbial one car funeral.
Enough F&F threats and congressional hints were fired at Mnuchin last week directing him not to do anything good re GSE capital or anything without prior congressional approval that he would be a fool to move forward with any of his progressive/creative GSE ideas, no matter how correct they seem.
Now, I think the Treasury Secretary has lost the political momentum he may have had early on for acting administratively on GSE release and recap. He's in the middle of internecine as well as partisan warfare on many policy fronts that Treasury must manage for the President.
As I’ve been reminding people in my blogs, Mnuchin and the Trump White House will need many/all of those congressional GSE command shouters and letter writers when the Admin wrestles with tax reform, immigration, infrastructure plans, greater military budgets, building “the Wall,” etc. etc. etc. And Steve Mnuchin and the Treasury are targets in those fights. (Maybe we shouldn’t worry, since any day now, President Trump may dispatch his son-in-law, Eric Kushner, who looks like Dr. Seuss's Bartholomew Cubbins with all of those policy hats, to help Mnuchin in Jared’s spare time.)
As my good friend, Mr. Fidlesticks, to the blog and Twitter world, observed to me, “It’s a shame when waiting 75 days into a new administration means you waited too long to make changes.”
GSE Justice Wheels Do Turn, Albeit Slowly
Just so I don’t appear too judicially and GSE negative (although, admittedly, I am jaundiced), I will note—although it took eight years (2004 to 2012)--one federal judge rose above the mire and finally did away with “violations of securities laws” legal claims, which lay against former Fannie execs, Frank Raines, Tim Howard, and LeAnne Spencer Garmon.
Those started with an erroneous and vengeful 2004 Office of Financial Enterprises Oversight (OFHEO) report. (OFHEO was the original GSE regulator until succeeded in 2008 by the FHFA.)
So, sometimes, the good guys do win.
On another plus point, since I raised Tim Howard’s name, folks should look at his blog response (last Friday) to a question about what GSE options Secretary Mnuchin possesses.
As I always remind readers, I could be very wrong and Tim is far more positive about Mnuchin’s policy choices than I have been.
I won’t repeat verbatim what I’ve written before, but with certain the Hill guys, i.e. Senators Corker (R-Tenn.) and Warner (D-Va.), preening on other matters, it will be tough for “Nooch” to avoid their Senate GSE priorities, which are not positive and clash mightily with his.
DJT’s Lousy Week, Hardly Dazzling
Our President had a very erratic and bad week.
His emotional defeat overhang was palpable and exploded on Twitter following his embarrassing setback when the Speaker Paul Ryan (R-Wisc.)—had to pull the Trumpcare bill for lack of GOP support.
DJT was outraged at the House Freedom Caucus and its leaders, against whom he Twitter-vowed 2018 election threats because he held them responsible for that failure. (See Trump on achieving personal revenge, below.)
Also, see the Admin's circular firing squad attacks on Rep, Justin Amash (R-Mich.) and other R's, crazy, just crazy.
More bad news for the Trump’s Admin was Congress’s burgeoning investigation into Russian involvement in last year’s presidential election and, possibly, direct efforts on behalf of the Trump campaign to have the Russians politically despoil Hillary Clinton.
There’s something very rotten, very anti-USA in Russia and always has been time; all of the GOP feigned disinterest, WH bleating, Clinton finger pointing, and efforts to deflect attention to others, won’t make it all go away. (Sleep with dogs and you wake up with fleas.)
Congress’s early steps in the House have been very clumsy. House Intelligence Committee Chairman Devin Nunes (R-Cal.) Trump butt kissing has been shoddily transparent, unhelpful, and unprofessional. Plus he looks lost and silly.
There have been better Senate steps, with some choreographed bipartisanship between Sen. Richard Burr (R-NC) and Mark Warner (D-Va.). But those could disassemble if the guilt flame burns close to the WH and this President and Burr—not the most spine-rich poll-- turns chary.
Poor Sean Spicer. Someone better clue in Press Secretary Spicer when WH execs welcome Nunes into the facility and feed him intelligence records so Nunes can better shill for the President. Sean embarrassed himself, again, trying to explain what did happen with Nunes, didn’t really happen. (I still think, Sean will be gone to some lofty, well paying, no-brainer GOP job outside of government position in weeks, just as Reince Priebus’ long time deputy, Katie Walsh, got shuffled last week out of her job owing to whatever she didn’t do right on the Trumpcare vote.)
(BTW. Let the record show that this blog and the above segment were prepared on Friday; MrF saw the draft and can attest to the fact that it was produced two days before the lead Sunday Washington Post editorial on Trump and Russia appeared, which said much the same as I wrote. I don't crib from the Post's editorials.)
Cheney, Cheney, Cheney
Looking at the Russian intrusions into our democratic electoral processes, I knew Dick Cheney would be good for something, beyond being a doorstop.
Mike Flynn seeks “immunity;” Why?”
Why? Let’s first ask General Flynn himself and then ask Rep, Jason Chaffetz (R-Utah).
“When you are given immunity that means you have probably committed a crime.” (Mike Flynn, last September, on Meet the Press.)
See Chaffetz’s response, below.
My March DJT “campaign call?”
In the middle of all of this political and governing frenzy, or lack thereof, craziness, in midafternoon Tuesday, I received what only can be called a highly out of sequence campaign robo call from President Trump, who was urging me a year before the midterm elections to send money and support him and his GOP allies against those who would scuttle the Trump agenda.
The man’s been in the job 75 days, has spent more time golfing than “Presidenting” and he’s campaigning for 2018 (but really 2020, seeking funds and support).
Mr. P, How about doing your day job, better, the one many—not all—Americans chose you to perform?
The nation deserves better WH leadership and we just need to keep reminding President Trump of that.
He’s our President, not Barack Obama or Hillary Clinton.